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The Entrepreneur’s Guide: How to Make a Business Model?

  • Posted July 21, 2018

You have a great idea to start your own business but do not know where to start? Do not worry! Throughout these weeks we will present a guide with all the steps you must follow to start your online business.

We started in this post for the first step, which will be to create a Business Model that establishes your short-term objectives and that will serve as a cover letter for potential investors. It is the first tool with which you will have to work as a previous step to the Business Plan and that will allow you to clearly define the following elements:

  • What will you offer to the market?
  • How will you define and differentiate your products?
  • How will you sell your products to generate profit and value?
  • Who are your customers going to be?
  • How are you going to get clients and keep them?
  • How are you going to show up at the market?
  • What will be your strategy to go to the market: advertising and distribution?
  • How you are going to generate income and benefits?
  • How are you going to establish social benefits?

To decide your Business Model, you can use The Business Model Canvas, created by Alex Osterwalder. It is a very simple scheme that will allow you to see in a single page the 9 elements that should compose your business model. Osterwalder explains in his book Generation of business models that “the best way to describe a business model is to divide it into nine basic modules that reflect the logic that a company follows to obtain income. These nine modules cover the four main areas of a business: customers, supply, infrastructure and economic viability “.

Customer segment

Customers are the main basis of your Business Model. You must know perfectly to whom you want to sell your value proposal and what needs it has. Analyse at this point the group of clients that you will reach and reflect on those needs that you will be able to cover with the purchase of your product.

Value proposal

Your value proposition is what you expect to do better or differently than your competition. A company may have one or several value propositions, depending on whether it is directed to one or more target groups.

In this step you must describe the proposal that you will offer to your clients, which will be based on the following points:

The problems that are solved to the customer when using your product.

The needs that you will cover with your product.

The characteristics of the product that will be highlighted in the market.

You must offer your customers something unique that other brands do not offer, do you already know what it is? If so, you already have almost all the work done!

Relations with customers

At this point you should analyse the type of relationships that will be established with your client at the moment they acquire your product. It is about identifying which is the most aggressive and creative way to establish long-term relationships. How will you integrate relationships with your clients so that they work in harmony with your Business Model? Will you talk about you or you? What do they seek and expect from you?

Distribution channels

As the name suggests, you must include in this section how you will distribute your product so that it reaches the final customer in the most effective and safe way. You must identify the distribution channels that will work best for your product and to make your costs efficient. In this section would also enter the communication strategy that you will carry out to promote your product, how will you get to know new customers?

Sources of income

In this section you will have to evaluate how much money your customer will be willing to pay for the purchase of the product, and you will solve the three main questions about how you will get income with your idea:

How much will they pay for my product?

How much do you currently pay for a similar product?

How much do you have to enter to obtain the desired profit margins?

Key activities

Here you must define the internal key activities that will allow you to deliver the value proposition to your customers: production processes, advertising and marketing etc. In this way you will know the key activities that will give value to your brand, and you will know what strategies you will carry out to enhance them.

Key resources

At this point you must identify the infrastructure necessary to operate your Business Model, what are the essential assets to carry out the entire process? It refers to both physical, intellectual, financial and human resources, which cannot be missing for your product to be a success in the market.

Key partners

Who will be your partners, commercial and suppliers? What strategic alliances will you carry out? This point is a fundamental piece for networking, since the more quality contacts you have within your own market, the better results you can achieve.

Cost structure

And we reach the last point. Now that you know what resources will be needed to carry out your idea and how much customers will pay for your product, you can define the strategy that your Business Model should follow to maintain the cost structure, calculating investment expenses and the profitability of your proposal, and trying to make the most of the benefits. You must decide between keeping costs low, and being a business that focuses on creating value at a higher price. For this you must evaluate the following points:

What are the most expensive key resources and how can you reduce them?

What key activities are the most expensive?

What are the most important costs for the realization of your business model?

Do you already have your idea clear? Do not wait any longer and start developing it with us. With our expert professionals, the success of your Business Model is assured.

NORO Solutions is an Online Business Solutions Brand. We provide Business Consultancy through a Research and Solutions based approach. We specialize in the areas of Business Modelling, Business Strategy, Marketing Strategy and Business Intelligence. Write us via admin@norosolutions.com to contact with a Business Consultant. We can assist you in building your Business Model, Competitor Strategy, Business Strategy & Marketing Strategy in a systematic, fact-based & convenient manner. You can also consult us for Business Research. We welcome queries from all countries! 

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